Corporate Political Ties and Firm Performance in a Transition Economy: A Replication and Extension of Peng and Luo (2000)

Abstract

How do corporate political ties impact firm performance in a transition economy? This topic has attracted wide attention in the strategy field. Accordingly, our study replicates a highly influential study, 'Managerial ties and firm performance in a transition economy: The nature of a micro-macro link' (Peng & Luo, 2000). The original study found that managerial political ties greatly improve organizational performance, and that this 'micro-macro' link varies across ownership types, business sectors, firm sizes, and industry growth rates. This replication study offers a hierarchical view of political ties by extending it from the individual to the organizational level and explores the complex link between the two levels of corporate political ties and firm performance. The results of a staged quasi-replication exercise show some similarities with the original study in the mechanism of corporate political ties on firm performance but, more importantly, reveal some key differences in the effect size and contingent effects. Furthermore, an extended test shows that corporate political ties are multilevel, and different levels of political ties vary in their mechanisms and effects on firm performance. The findings reveal temporal and contextual sensitivities of political ties studies in transition economies.